Stock Market

[JeffDFD]

Good discussion on a greater topic of "when to sell." If we were talking about stocks and not TVIX, what would you all say?

[JeffDFD]

Good discussion on a greater topic of "when to sell." If we were talking about stocks and not TVIX, what would you all say?

[ExPatriatePen]

Good discussion on a greater topic of "when to sell." If we were talking about stocks and not TVIX, what would you all say?

For me, it's even more important to average in and average out with stocks.

Again, unless there's a major incident like rumor of accounting irregularity or a QC issue with a Pharmacuetical stock or some other major event.

[ExPatriatePen]

Just for giggles, I found this old thread this morning, it's fun reading:

http://www.letsgopens.com/scripts/phpBB ... =Economics" onclick="window.open(this.href);return false;

[Tomas]

JC Juncker cancels the Greece meeting scheduled for Wednesday because ""Furthermore, I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the programme," (http://www.reuters.com/article/2012/02/ ... A720120214" onclick="window.open(this.href);return false; ) yet market closed totally flat. I am still quite scared (especially since I bought some VEA and VWO the last week).

[ExPatriatePen]

That was a risky bet Tomas.

Especially since the Greek market took a serious tumble today.

[Fire0nice228]

I just placed a limit order for BAC if it drops here in awhile.. let ridicule begin?

[Tomas]

I usually don't get investment advice from Jim Cramer (though I think he often does a good job popularizing investment talk for general masses), but I really like his point here - 4.5% fixed from 30-year corporate Viacom bond is really strange IMO.

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[Tomas]

Gordon Gekko - the FBI spokesman!

http://www.cnbc.com/id/46542201/" onclick="window.open(this.href);return false;

(Incidentally, Douglas was not particularly pleased with the idolization he received from Wall Street types after the first movie.)

[KennyTheKangaroo]

michael lewis said the same thing about college kids that idolized him for his stories in liars poker

[Tomas]

So, Dow just broke 13,000, wine prices increased as well (http://www.cnbc.com/id/46545324" onclick="window.open(this.href);return false; - including the prices of f$%&* Merlot - my favorite bargain wines following the irrational decline in demand caused by "Sideways" ). People still buy bonds like crazy (http://www.cnbc.com/id/46557396" onclick="window.open(this.href);return false;), and commodities are on the rise. Where to invest now?

#whitepeopleproblems

[KennyTheKangaroo]

Q: Regarding bond bubble

what is the downside of a bond bubble bursting?

I.e. if there is a big correction in the us treasury market, and they sudden become unpopular, how mcuh could they loose, in terms of %?

does that question make any sense?

[Tomas]

Q: Regarding bond bubble

what is the downside of a bond bubble bursting?

I.e. if there is a big correction in the us treasury market, and they sudden become unpopular, how mcuh could they loose, in terms of %?

does that question make any sense?

Here is the example based on the Viacom 30-year bond discussed in the Jim Cramer's video I posted above:

The bonds pay 4.5% coupon (1.5% "default spread" above the 30-year Treasury, currently at almost exactly 3%). Since the bond was just issued, it's safe to assume that investors were willing to pay $1,000 price for $1,000 face value (bonds are usually sold at par), so the discount rate (i.e. Yield to Maturity, YTM) for these bonds was also 4.5%.

Now, the long-term average of LT Treasury bonds is at least 5% (http://www.stern.nyu.edu/~adamodar/pc/d ... tretSP.xls" onclick="window.open(this.href);return false; ). Let's say it's 5%, to be conservative. Say that in 5 years, after FED decides not to influence interest rates, the Treasuries indeed move to 5%. In that case (assuming Viacom "default spread" does not change), the YTM for Viacom bonds goes up to 5%+1.5% = 6.5%, and the price of the bonds will be:

Present Value of the Annuity of $45 coupons for 25 years + PV of the $1,000 face value after 25 years, i.e. (using EXCEL formulas):
=+PV(6.5%,25,-45)+1000/(1+0.065)^25 = $756.04

That is, your bonds will lose nearly 25% from their original $1,000 value. If the YTM goes to, say, 7.5% (because Treasuries and/or the default spread increased even more), then the price will be:
=+PV(7.5%,25,-45)+1000/(1+0.075)^25 = $665.59 , i.e. 1/3 loss on your investment

[KennyTheKangaroo]

eff

that was more than kenny the kangaroo hoped

[ExPatriatePen]

eff

that was more than kenny the kangaroo hoped

Actually, that was AWESOME Tomas!!!

That's exactly how one should analyze Bond investments, it's obvious you've chosen the right career. I hope your students appreciate what you have to offer.

I love that answer, you need to post more often Tomas!

[KennyTheKangaroo]

Actually, that was AWESOME Tomas!!!

That's exactly how one should analyze Bond investments, it's obvious you've chosen the right career. I hope your students appreciate what you have to offer.

I love that answer, you need to post more often Tomas!

agreed that it was an awesome post

the eff, thats more than kenny the kangaroo hoped was the ~25% drop in the price of the bond. thats no fun.

[ExPatriatePen]

Actually, that was AWESOME Tomas!!!

That's exactly how one should analyze Bond investments, it's obvious you've chosen the right career. I hope your students appreciate what you have to offer.

I love that answer, you need to post more often Tomas!

agreed that it was an awesome post

the eff, thats more than kenny the kangaroo hoped was the ~25% drop in the price of the bond. thats no fun.

Depends on which side of the trade you're on doesn't it?

[King Sid the Great 87]

Seems to me the time to move into fixed-income securities was three years ago. If I was holding now, I'd certainly be looking to get out. As low as interest rates are, they aren't going to stay this way forever, especially with leading indicators such as pending home sales and consumer confidence showing signs of trending upwards. If the market crosses a threshold of improvement, I could see the Fed back-pedaling on their decree to keep rates low until 2014. Corporations are going to have to poop or get off the pot, and if I was in a position to influence, I'd be loading up on all the cheap debt I could get now, because it is going to be gone soon. Those that take advantage and have the means/leadership to use it properly are bound to see benefits in the market.

I hold about 10% of my retirement portfolio in fixed-income, all in TIPS. I'm betting that there is too much cheap money getting pumped into the economy as a result of the recession, and we are going to end up with somewhat uncomfortable inflation, at least for a time.

[ExPatriatePen]

I'm betting that there is too much cheap money getting pumped into the economy as a result of the recession, and we are going to end up with somewhat uncomfortable inflation, at least for a time.

I've been saying the same thing since the first round of QE, so far I've been wrong.

Eventually though, there's no question this baby's gonna 'blow'.

You can feel it.

Unfortunately, I get the sense that oilmprices are going to limit economic expansion for a while.

[KennyTheKangaroo]

so why did gold drop 5% today

[Tomas]

Inflation? What inflation??

Quality investigative reporting by CNBC...

http://www.cnbc.com/id/46653562" onclick="window.open(this.href);return false;

[Hockeynut!]

That's a lot cheaper than having a real girlfriend.

[columbia]

Inflation? What inflation??

Quality investigative reporting by CNBC...

http://www.cnbc.com/id/46653562" onclick="window.open(this.href);return false;

Photos please.

[shafnutz05]

Wow, those are reasonable prices...

[mac5155]

Time to buy some I bonds?